Suddenly the problems surrounding the mismanagement of the Dallas Fire and Pension Fund became well known to a large number of North Texas residents, thanks to a lawsuit filed by Dallas Mayor Mike Rawlings on December 5, 2016 at the court of the state Judge Tonya Parker to stanch the bleeding of the fund.
The underlying causes have been brewing for long time, and over the years, they have led to a potential fiscal disaster in waiting for Dallas' City Council and citizens. The administrative structure of the pension fund is partly to blame for this mess. Although Dallas citizens contribute to the fund--based on a recent article penned by former Mayors Ron Kirk, Laura Miller and Tom Leppert, Dallas citizens have contributed more than $1.1 billion to the fund--City Council has no say how the fund is run. Texas legislature should take up this issue without any further delay in the upcoming legislative session and make amends to it.
Over the years, pension board has failed to ensure the role of a responsible and responsive custodian to sustain the long-term fiscal health of the pension fund that Dallas' heroic police and fire personnel have come to count on as their prime dependable retirement source. Instead, pension board looked the other way as risky investments have been made in real estate without appropriate vetting and oversight.
Another key problem that had afflicted the pension fund was its board's failure to adjust to a changing time when company after company had been leaving the defined benefit plans to a more sustainable defined contribution plan. The pension fund continued to provide a very lucrative plan, called the Deferred Option Retirement Plan, or DROP, to long-serving police and fire personnel, making many of them millionaires. DROP provides the employees with the opportunity to retire in the eyes of the system while stay in their job. Meanwhile, their retirement check is accruing 8 percent annual returns in their DROP accounts.
Once it became clear that this unhinged plan would exhaust the fund, the pension fund's board took some minimal actions such as recommending benefit cuts and reduction in DROP's rate of return to 3 percent. As the reform measure was recommended to be sent for a rank-and-file vote, a spree of withdrawals began from the DROP accounts. According to some estimates, about $500 million was withdrawn since August 11, 2016 through the day when Mayor Rawlings filed his lawsuit as a private citizen on December 5, 2016.
It is clear that the days of Dallas City Council and its residents to stay on the sidelines while contributing to a bleeding police and fire pension fund are over. Pension fund's board may now expect that Dallas City Council will ask plenty of questions to them as well as tell what needs to be done as long as Dallas citizens are on the hook to fund the plan.
The underlying causes have been brewing for long time, and over the years, they have led to a potential fiscal disaster in waiting for Dallas' City Council and citizens. The administrative structure of the pension fund is partly to blame for this mess. Although Dallas citizens contribute to the fund--based on a recent article penned by former Mayors Ron Kirk, Laura Miller and Tom Leppert, Dallas citizens have contributed more than $1.1 billion to the fund--City Council has no say how the fund is run. Texas legislature should take up this issue without any further delay in the upcoming legislative session and make amends to it.
Over the years, pension board has failed to ensure the role of a responsible and responsive custodian to sustain the long-term fiscal health of the pension fund that Dallas' heroic police and fire personnel have come to count on as their prime dependable retirement source. Instead, pension board looked the other way as risky investments have been made in real estate without appropriate vetting and oversight.
Another key problem that had afflicted the pension fund was its board's failure to adjust to a changing time when company after company had been leaving the defined benefit plans to a more sustainable defined contribution plan. The pension fund continued to provide a very lucrative plan, called the Deferred Option Retirement Plan, or DROP, to long-serving police and fire personnel, making many of them millionaires. DROP provides the employees with the opportunity to retire in the eyes of the system while stay in their job. Meanwhile, their retirement check is accruing 8 percent annual returns in their DROP accounts.
Once it became clear that this unhinged plan would exhaust the fund, the pension fund's board took some minimal actions such as recommending benefit cuts and reduction in DROP's rate of return to 3 percent. As the reform measure was recommended to be sent for a rank-and-file vote, a spree of withdrawals began from the DROP accounts. According to some estimates, about $500 million was withdrawn since August 11, 2016 through the day when Mayor Rawlings filed his lawsuit as a private citizen on December 5, 2016.
It is clear that the days of Dallas City Council and its residents to stay on the sidelines while contributing to a bleeding police and fire pension fund are over. Pension fund's board may now expect that Dallas City Council will ask plenty of questions to them as well as tell what needs to be done as long as Dallas citizens are on the hook to fund the plan.